How to Keep Inflation From Eating Away at Your Money

Inflation is often dubbed as a hidden tax, and therefore is the worst kind of tax, because most people don’t even realize its effect on their money. Consider this scenario: You have Rp 50 million in a bank savings account. You earn 0.75% a year from your savings, but if you take inflation (last year’s at 3.81%), and the bank’s administration fee, into account, you are actually losing money.

Even if you put your Rp 50 million in a time deposit account and earn 4.5% a year, it would still mean you are not actually growing your money. At the end of the time deposit period, your return is subject to 20% income tax, which means you are getting only 3.6% after tax. Factor in the 3.81% inflation rate and, again, you are still actually losing your hard-earned cash.

So, how to keep your money safe from the inflation monster? Follow these tips to make sure you beat the impact of what they call the ‘stealth tax’.

1. Choose investments with higher yield

To beat inflation, you must earn at least 6% from your investments. There are many options you can try. Stock trading, mutual funds and online lending can easily give you much more than just 6%. But a seasoned investor will tell you that stocks are among the riskiest investments and even mutual funds and online lending carry a degree of risk.

If you are looking to minimize your risks, you can invest in peer-to-peer lending on the Mekar.id platform, where you will get a 100% protection for your initial investments. Mekar also offers a handsome return, starting from 10% up to 16% per year. You don’t even need to have a lot of money to be able to invest in Mekar; investments can start from as little as Rp 1 million.

2. Buy gold

Gold can be quite a good hedge against inflation. This is true especially in the case of hyperinflation or financial crisis, so you might want to hold on to this precious metal just in case. But if you are optimistic about the economy, you might want to be a bit more aggressive with your money.

3. Acquire a property

Owning a property is another great way to safeguard your money against the corrosive effects of inflation. As prices increase, investors will ride the wave of rising property values. Not to mention the rental income that can be generated from real estate investment.

4. Collect art

Many have argued that art can provide a good inflation hedge. Modern art, in particular, may help when there is a short-term increase in prices. Indeed, art is an alternative asset class that can prove to be beneficial to your portfolio, but keep in mind that there are factors that may affect its value over time, such as changes in trends or the condition and visual quality of the artwork itself.